Amazon stock declines, uncertainty obscures a positive sales

Monetary products and companies business invoice – we’re in dreadful waters – FMF

One of the biggest businesses in the world, Amazon.com Inc. (AMZN), is a leader in cloud computing and online shopping worldwide. When it was first established in 1994, Amazon was a web-based bookstore. Following an initial public offering (IPO) in May 1997, Amazon shares were put on the market. On the Nasdaq Global Select Market, its stock is listed.

For investment purposes, Amazon is categorised with consumer discretionary stocks; but, given that Amazon Web Services (AWS) is a top cloud computing provider, it is also a component of numerous mutual funds and exchange-traded funds (ETFs) focusing on the technology sector. Brick-and-mortar stores like Walmart Inc. (WMT), eBay Inc. (EBAY), and rivals Microsoft Corp. (MSFT) and Alphabet Inc. (GOOGL), which provide cloud computing services, are some of the company’s key rivals.

On Thursday, Amazon revealed revenue that was more than anticipated, but the stock’s initial surge was erased after executives expressed worries about the continued downturn in cloud growth.

These are the crucial figures:

  • Earnings per share were 31 cents, vs the $124.5 billion projected by analysts surveyed by Refinitiv. 
  • Revenue was $127.4 billion.

It’s not immediately clear whether the reported earnings match the consensus forecast of 21 cents per share from Refinitiv.

Here are the results of other significant Amazon segments for the quarter:

• According to Street Account, Amazon Web Services generated $21.3 billion versus the predicted $21.22 billion.

• According to Street Account, advertising generated $9.5 billion versus the $9.1 billion anticipated.

AWS’s first-quarter sales increased by roughly 16% to $21.35 billion, exceeding the $21.22 billion forecast by Wall Street. Even yet, that is a slowdown from the prior quarter, when AWS increased 20%.

Due to the current economic climate, businesses have been cutting back on their cloud spending. Finance chief Brian Olsavsky issued a warning on the call following the revelation that clients are continuing to reduce their budgets.

According to Olsavsky, “as anticipated, clients continued to assess ways to optimise their cloud spending in response to these challenging economic conditions in the first quarter. With April revenue growth rates roughly 500 basis points lower than what we experienced in Q1, these optimisations are continuing into the second quarter.

After Amazon announced revenue increased 9% from $116.4 billion a year earlier, exceeding estimates, the shares initially surged as high as 10%. Despite the revenue surprise, Amazon is still experiencing single-digit sales growth after its worst year for growth in its 25 years as a publicly traded corporation.

During the earnings call, the stock started to decline and turn negative, falling by almost 3% below its closing price.

Amazon predicted that second-quarter revenue will range between $127 billion and $133 billion. Refinitiv claims that analysts predicted sales of $129.8 billion. According to the second-quarter prediction, Amazon anticipates sales to increase by 5% to 10% from the same time last year.

CEO Andy Jassy stated in the earnings announcement that “our advertising business continues to deliver robust growth, in large part due to our ongoing machine learning investments that help customers see relevant information when they engage with us, which in turn delivers unusually strong results for brands.”

In July 2021, Jassy took over as CEO from founder Jeff Bezos. As Amazon struggles with sluggish revenues in its cloud computing and online shopping operations, Jassy has been aggressively cutting costs. A healthcare programme and a line of fitness wearables were among the riskiest projects that Amazon has abandoned. The development of its second headquarters, known as HQ2, in Virginia has also been halted and a new warehouse expansion has been stalled.

The greatest workforce reductions in Amazon’s 29-year history total 27,000 layoffs. Following cuts to Twitch live streaming and advertising earlier this week, some employees in AWS and human resources were let go.

Amazon reduced its workforce by approximately 76,000 individuals to 1.46 million as of the end of the first quarter, reflecting both recent layoffs and attrition in its warehouses that generally occurs following the peak holiday shopping season.

During the quarter, net income was $3.2 billion, or 31 cents per share, compared to a net loss of $3.8 billion, or 38 cents per share, the previous year.

Operating income increased to $4.77 billion in the third quarter, up from $3.67 billion the previous year. The company’s profitability is still dependent on AWS, which produced $5.1 billion in operating profits in the quarter.

Amazon’s advertising division is still doing well, with revenue rising 23% annually to $9.51 billion.

“Advertising was a strong growth during the quarter at 23%, and that is continuing to hold up very well in an environment where perhaps the underlying sales of products is slowing,” Olsavsky said on a conference call with reporters.

After losing about half of their value in 2022, Amazon shares were up 31% for the year prior to the after-hours action.

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